DUBAI: Saudi Arabia’s economy improved in annual terms to grow 2.7 percent in the second quarter of 2013 as non-oil business expanded robustly while a decline in the oil sector eased.
Growth in the world’s top oil exporter had slowed to as low as 2.1 percent in January-March, the weakest since at least 2010, as crude sector output dropped.
A quarter-on-quarter comparison showed Saudi GDP fell 1.1 percent in April-June, the first such decline in a year, according to a Reuters calculation based on the official data. It had grown 2.7 percent quarter-on-quarter in January-March.
Growth in the biggest Arab economy is closely linked to energy prices and crude oil output, as well as to government spending which has been rising sharply over the past decade.
Output of the oil sector, which accounts for nearly half of the $711bn economy, fell 3.7 percent year-on-year in the second quarter, less than a 6.3 percent drop in January-March, the data from the Central Department of Statistics showed. It jumped 9.6 percent in April-June 2012.
“It is the oil story that is putting a dampener on headline growth,” said John Sfakianakis, chief investment strategist at MASIC, a Riyadh-based investment firm.
As crude oil supply from Iran and Libya declines, Saudi Arabia may increase exports to fill in the gap, which could help lift economic growth in the last quarter.
“The expectation is that in the fourth quarter we will see a pick-up and that will push the headline a bit up,” Sfakianakis said.
Saudi oil exports averaged 9.3 million barrels per day (b/d) in the first half of 2013, down from 9.9m b/d in the first six months of last year, according to government figures.
Scorching summer heat also usually slows Saudi economic performance in the third quarter. However, growth in non-oil private business activity hit a four-month high in August with both output and new orders up, a purchasing managers survey showed earlier on Tuesday.
Growth in the non-oil private sector edged down slightly to 4.2 percent in April-June compared with a 4.3 percent expansion in the first three months of 2013.
“In general, our forecast still holds that GDP growth will be slower (in 2013) than last year,” said Fahad Alturki, head of research at Jadwa Investment in Riyadh.
“This slower growth is mainly due to a cut in oil production. Both the private and the government sector will see lower growth than last year as the impact of the fiscal stimulus introduced in 2011 is fading away,” he said.
Analysts polled by Reuters in April forecast Saudi economic growth to slow to 4.1 percent in 2013 and 4.0 percent in 2014.